Pictet Wealth Management’s latest positioning across asset classes and investment themes.
Asset Allocation
- We remain neutral on global equities overall, seeing relatively limited potential for developed market stocks in particular as earnings growth declines. We favour companies with pricing power as well as measurable growth drivers and low leverage.
- We have moved from underweight to neutral in US Treasuries, as the rise in yields slows. But we have shifted from a neutral to underweight position in core euro area bonds ahead of monetary policy normalisation.
- We have moved to underweight from neutral in corporate bonds, as rising rates threaten to expose vulnerable parts of the credit market.
- We continue to diversify into alternative assets to compensate for falling expected returns for traditional asset classes.
- We have recently made a push into Indian and Chinese equities, believing emerging markets’ long period of underperformance against developed markets is coming to an end.
Commodities
Currencies
Equities
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MSCI China and Emerging Markets Performance, 2018 |
Fixed Income
- We have turned neutral on US Treasuries overall, with their relatively high coupon providing some protection against the further, limited rises in US rates we expect next year. We also believe German Bund yields will rise modestly next year as the ECB moves away from monetary easing.
- Increasing rates and slowing growth are making the climate more challenging for credit. We have moved to an underweight position in corporate credit overall.
Alternatives
- The resurgence of volatility, dispersion and a renewed focus on fundamentals will drive our hedge fund strategies next year. We are reinforcing positions in relative value and arbitrage-focused strategies, as well as global macro
- With competition for deals high and valuations challenging, our private equity strategy is focusing more intently than ever on manager selection.
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